Donna Perry: No Time for Timid Pension Reform in Providence

As the clock ticks toward May 1st the city of Providence remains mired in multiple deficit resolution plans, pension system reform proposals, and scattered negotiations with both active worker unions and sets of retirees.

It is worrisome that as the clock ticks, the emerging details of the very latest pension reform offer coming from Mayor Taveras appears far more timid than his earlier assertions that only an aggressive reining in of the city’s runaway pension system will save the city from receivership. Further troubling is that his newest posture may serve to undermine a major pension reform blueprint for Providence unveiled just one week ago.

The reason the leading statewide citizen taxpayer advocate, the RI Statewide Coalition (RISC) got behind the pension reform ordinance plan released by a key City Council subcommittee is because it put forth a comprehensive, reasonable but major savings targeted plan that seems well prepared for court challenge. The newest proposal from Taveras, which seems to contradict key pieces of the subcommittee proposal, would water down the dominant COLA piece in the following way: he would leave COLA’s alone to the lowest pensioners, those with annual pensions of under $40,000; apply the Council’s recommendation to freeze COLA’s for a long duration to those whose pensions range between $40,000-$80,000 –and—for the windfall crowd, those whose compounded COLA-fueled pensions ($80,000 or more) far exceed any base salary most ever earned during their working years, the COLA would be outright eliminated.

But what some may see as the “Taveras cave in” piece of this seems to be his intent to disregard the Council subcommittee’s recommendation that no city pension can exceed a specific formula of one and half times the state’s median income. The Council is seeking, as part of its ordinance change plan, to cap pension benefits that would surely affect the $80,000 –plus elite. Though Taveras is favoring eliminating COLA’s for this segment of retirees, his newest proposal does not seem to address a critical cost saving, and many would argue, taxpayer justified idea to cap benefits to existing retirees.

Although the Mayor now may want it to appear that he is embracing a “meet me halfway” pension overhaul approach with the unions, it seems more like a weakened “I’ll walk three quarters of the way to you” strategy. Furthermore, it seems motivated by a mistaken belief that watered down pension reform proposals will keep the unions out of court, cooperative and seeking to be a “part of the solution”. The newest pieces of reactions from dominant city unions, especially police and firefighter union leaders, would seem to indicate it is highly unlikely such a scenario will play out.

Further complicating these newest revisions from the Mayor is his own just released budget blueprint. It seems a muddled approach to pare back the COLA suspension piece, and refrain from embracing base pension caps from the Council’s work, thereby scuttling the built-in savings projections that go with it, and then offer a budget plan that seems to be still accounting for those savings.

The secondary, though no less threatening retirement liability looming outside the door of the Mayor’s office is the retiree health care obligation, now pegged at $2.1 billion. The Council subcommittee report last week seeks mandatory 20% co-pays across the board for all individual retirees, spouses and families if there’s any hope of meeting that monstrous obligation. There’s no indication Taveras will backpedal on that key recommendation, however the courts will have the last say anyway. They have already handed Taveras and the city preliminary setbacks on retiree health care over the city’s intent to force all retirees into Medicare coverage and come off private plans at age 65, and the full trial goes into motion in May.

It’s understandable that this very intelligent, ambitious and by all accounts generally very diligent Mayor is intent on smoothing over the rougher edges of needed retirement reductions if he believes such an approach will get him to the solution he needs, keep unions out of further court activity, and keep the city afloat. Yet his newest posture, which in all fairness, seems a departure from his generally direct tone of the past many months, seems to reflect what seasoned negotiators would characterize as the least effective: a growing timidity or even weakness.

The tough reality is that the bankruptcy wolf has been at the door of Providence for a while now and timid pension cutbacks and mixed signals won’t provide the strength needed to keep the beast from breaking it down.